Danish local councils are counting their losses following speculation in Swiss
franc loans that has cost them dear.
In 2012 alone, 22 local councils have cleared or refinanced expensive loans
that in the case of 12 of them has given a total loss of DKK210 million.
Although the controversial loans were banned in February, some 26 councils
still have them according to a Politiken survey of 95 of Denmark’s 98
councils. Just over half of the councils have at some time tried to
speculate in Swiss franc loans or swaps.
Economy and Home Affairs Minister Margrethe Vestager says she is pleased that
so many councils have refinanced the loans, adding that the new rules
determine that in future council loans must be in Danish kroner or euros.
In all, councils took out Swiss franc loans totalling DKK5.8 billion, falling
for the temptation to take out foreign currency loans that were cheaper than
Danish loans at the time.
“As a council you look at all the possibilities in order to increase your
funds,” says Sorø Council Mayor Ivan Hansen, whose council lost DKK7.8
million when the financial crisis made Swiss franc loans more expensive.
Fredensborg Council in North Zealand is one of the councils that is hanging on
to its loans – and like others in the same situation is holding its breath,
hoping for the loans to become cheaper.
Others have chosen to cut their losses straight away. Lolland Council, for
example has lost a total of DKK120 million.
CBS Economy Professor Finn Østrup says the ban that is now in place may not be
enough, and perhaps councils should be prevented from flirting with
“A council’s job is to provide welfare. That is drains and kindergartens and
not advanced financial instruments entered into with financial
institutions,” Østrup says.
Vestager agrees, saying councils should not be creative in handling their
“Perhaps (they should be) less ambitious in how advanced things should be. The
more advanced they are, the more difficult it becomes for counsellors to
understand,” she says.
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